Demolition: Shuttered factories keep contractors busy

The building demolition industry is a beneficiary of Michigan's painful economic restructuring.

"Over five million square feet of industrial plants have been demolished in the past 24 months in Mid-Michigan," said Pat Wurtzel of Bierlein Companies of Midland.

Brownfield redevelopment
When Michigan's manufacturing facilities close their doors, potentially dangerous abandoned buildings become a concern for local governments.

"Many communities have established brownfield redevelopment authorities that have assisted in the funding of demolition and remediation activities for obsolete properties," Wurtzel said.

According to the Michigan Department of Environmental Quality, the purpose of Brownfield redevelopment is to "reduce urban sprawl into undeveloped areas by encouraging the reuse of established commercial, industrial and residential properties where public services already exist."

If a local government establishes a BRA, the Brownfields Tax Incentive allows environmental cleanup costs to be deducted in the year incurred, rather than capitalized over time. Additionally, property owners can apply for a Michigan Business Tax Brownfield Redevelopment Credit for properties included in a Brownfield plan.

"Demolition nationwide has been growing at a rate of 2 percent to 3 percent over the past decade," Wurtzel said. "The Northeast, particularly Michigan, has been bucking this trend because of our eroding manufacturing base and the increase in abandoned manufacturing facilities. Demolition has actually grown 5 percent to 6 percent in this region."

Scrap metal
The recent jump in scrap metal prices has also been positive for demolition contractors. Many property owners have cashed in on the salvage value of abandoned and dilapidated real estate.

"The high price of scrap materials has encouraged the owners of abandoned manufacturing facilities to proceed with demolition," Wurtzel said.

As worldwide demand for raw materials continues to increase, demolition-for-scrap may continue to be viable and cost-effective option for otherwise hopeless properties in Michigan.

Recycling
As environmental concerns continue to weigh on businesses, landfills are becoming less- popular destinations for building materials. Because of this, disposal costs have gone up for demolition contractors, said Sheri Fischer of Dore and Associates Contracting of Bay City.

In the face of these swelling dumping fees, recent developments in materials recycling have worked in favor of demolition contractors.

According to the U.S. Environmental Protection Agency, reducing and recycling demolition materials saves landfill space, creates jobs, and can reduce overall building project expenses through avoided purchase and disposal costs. "We try to recycle as much as we can," Fischer said.

Items such as concrete, wood, asphalt, bricks, glass and plastics are now being salvaged from demolition sites across the country.

Although disposal costs may continue to rise, "due to the increase in the recycling of all demolition materials, the net cost of disposal is still lower than it was 10 years ago," Wurtzel said.

Removal and relocation
Due to the slack economy, demolition as preparation for new plant sites has been down. However, many companies are renovating and relocating their operations and equipment. This has given Michigan's demolition contractors, some of whom are also involved in dismantling and asset recovery, a profitable side business.

"Plant renovation projects, particularly those involving the removal of plant assets, is up over 30 percent since 2002," Wurtzel said.

"The sheer size of the industrial projects has made this the largest segment" for demolition.